Higher Oil Prices Help ME Return to Growth

On the back of higher oil prices and a stronger global economic environment, the Middle East returned to growth in 2021, with a number of governments taking the opportunity to implement long-term plans aimed at diversification and modernization. Following a year in which economies in the Middle East contracted due to the fallout of COVID-19, the region experienced a positive economic rebound in 2021, with the IMF predicting in October that the region as a whole would expand by 2.7%. Looking more closely at the GCC, the World Bank estimated in December that the six-member bloc would record an aggregate growth rate of 2.6% for the year. Bahrain is forecast to have grown by 3.5%, followed by Qatar and Oman (3%), the UAE (2.7%), Saudi Arabia (2.4%) and Kuwait (2%). A key factor in this growth was the rise in oil prices.

After starting 2021 at just over US$50 a barrel, the price of oil increased to yearly highs of more than US$85 in October. Towards the end of the year prices fell again, however, as the Omicron variant dampened fuel demand, before closing out 2021 at around US$77 a barrel. Nevertheless, the earlier increase provided an economic boon to GCC countries throughout much of the year. While higher oil prices helped increase revenues across the region, a number of governments sought either to implement or to extend long-term fiscal rationalization strategies. A number of GCC countries also launched innovative reforms designed to incentivize foreign investment and bolster competitiveness. While attracting foreign investment remains a key aim for all countries in the GCC, some – among them Qatar – have also focused on increasing self-sufficiency in certain areas. “The blockade made us realize that we were depending too much on others in a number of fields,” Ziyad Eissa, CEO of S’hail Holding Group, told OBG. “Good relationships with neighbors are important, but Qatar needed a plan to operate independently in any scenario, and we quickly built up the necessary capabilities to maintain operations in all sectors, including primary and industrial”.

In addition to efforts to improve food security by investing in high-tech agricultural solutions, Qatar has also established significant industrial recycling facilities domestically. Recycling is seen as key to lowering the carbon footprint of heavy industry, which accounts for an estimated 27% of global emissions. “By the end of 2022, we expect Qatar to become the first country in the world to recycle 100% of its domestic solid metal waste locally, including lead, copper, aluminum, steel, brass and zinc,” Eissa said. Despite the region being home to some of the world’s largest hydrocarbons-exporting countries, a number of markets in the Middle East have sought to capitalize on the shift towards renewable energy throughout 2021. The measures reflect a broader trend in the Middle East towards low-carbon energy solutions. While Qatar itself has not yet announced a net-zero emissions target date, in October state-owned Qatar Petroleum said that it had changed its name to Qatar Energy, as part of an attempt to better reflect the company’s renewables-focused strategy. Although it will continue to export gas for decades to come, the company’s new strategy will focus on energy-efficient technologies such as CSS.